O'Malley seeks venture capital fund, wind farms in State of the State speech

February 3, 2011

Maryland Gov. Martin O'Malley urged lawmakers Thursday to back a $100 million venture capital initiative, spur investment in offshore wind farms and ban the installation of septic systems in major new housing developments.

O'Malley (D) used his fifth State of the State speech to pitch several priorities, some of which have already drawn skeptical questions from lawmakers in both parties and could test his political muscle after a convincing reelection in November.

In a 28-minute address to a joint session of the General Assembly, the governor also acknowledged unpopular budget choices ahead but asked for a continued focus on education, job creation and the environment.

"The state of our state is stronger today than two years ago. It is stronger than it was even a year ago. But better isn't good enough," O'Malley said in a speech that was interrupted by applause a dozen times. "There is more we can do, and for the sake of our children's future, there is more we must do."

Absent from the annual address - O'Malley's shortest since taking office in 2007 - was any mention of several issues expected to generate intense debate during the 90-day session. O'Malley said nothing about a bill to legalize same-sex marriage, for example, nor did he acknowledge efforts to raise the state's gas tax to fund transportation projects.

Instead, he spoke of preparing Maryland for "the new economy" and pushed a relatively narrow set of priorities, including the venture capital fund, which he said could be the difference between the next "world-changing company beginning in Maryland or watching it happen in Massachusetts."

Lawmakers said the proposal mirrors efforts in Tennessee, Ohio and about a dozen other states, where the results and levels of financial return have been mixed in recent years.

O'Malley's plan, in part, calls for making insurance companies eligible for state-issued tax credits if they invest dollars in Maryland's 14-year-old Venture Fund and venture capital firms based in the state.

Government involvement is needed, he said, "because seed and early stage money. . . have all but dried up in the national recession." Maryland's share of all U.S. venture capital investment has shrunk slightly during the recession, but about $357 million in deals were closed in the state last year.

Del. Sheila E. Hixson (D-Montgomery), chairman of the powerful House Ways and Means committee, said she would sponsor the bill but had concerns that would need to be hashed out with the administration and with industry leaders in coming months.

"I have to see a bigger picture than this. That's an awful lot of money we're investing, and is the return going to happen?" Hixson said.

Del. Brian J. Feldman (D), chairman of the Montgomery County delegation in the House of Delegates, said the legislation is "a very good thing" for his county, particularly emerging businesses in the Interstate 270 corridor.

"But there have been a lot of questions raised about the specifics of the bill, and there will be questions about how that money is allocated if you're going to get your most bang for your buck," Feldman said.

O'Malley's offshore wind legislation, which his administration has not yet introduced, will direct state regulators to require Maryland's utilities to award long-term contracts to procure certain amounts of wind energy. State officials have said that the first wind turbines could operate off Maryland's coast as soon as 2015.

Critics have said the legislation is certain to lead to higher energy rates in the short term because of the cost of constructing the wind farms.

Besides creating more renewable energy and reducing greenhouse gas emissions, O'Malley said the legislation would "jump-start the creation of thousands of 'green' manufacturing, assembly and servicing jobs on the shores and waters of Maryland."

Some legislators briefed on offshore wind last week were excited about the prospect of a new, clean energy source but also concerned about potential higher costs for consumers.

"No one questions the environmental benefits of wind," said Del. David D. Rudolph (D-Cecil). "But we have to ensure there's a market. You don't want to build it and then not have a market because the price is too high."

Some of the biggest applause during O'Malley's speech was for another energy-related initiative: setting "reliability standards" for Pepco and other utilities that could lead to fines if they are not met.

O'Malley announced plans for that bill this week after extended outages in the Washington area from a major snowstorm.

"Moms and dads deserve better than to sit for days in freezing homes because the power hasn't been restored," he said.

One of the only new initiatives mentioned in the speech was a ban on new septic systems in major housing developments - a "damaging trend," the governor said, because the systems "by their very design are intended to leak sewage into our bay and water tables."

O'Malley's call for banning the systems was met by near silence.

Senate Minority Whip E.J. Pipkin, a Republican who represents rural counties on the Eastern Shore, shook his head at hearing the governor's suggestion.

"It's a war on rural Maryland and a war on property rights," Pipkin said.

Pipkin and other lawmakers from rural parts of Maryland said the proposal shows an insensitivity to those who do not have access to public sewer systems and to farmers who might want to build additional homes on their property for children or other tenants.

But Del. Stephen W. Lafferty (D-Baltimore County) called the proposal "right on the money" because the state is "at a crucial point in looking at the problems septic systems cause and how to preserve more farmland."

O'Malley also used the speech to acknowledge the tough budget choices he and lawmakers face because of "our recession-battered revenues." A budget proposal he introduced last month, for example, would freeze funding for public education next year after years of major increases.

"When the economy recovers, we're going to do more for public education," O'Malley said.

O'Malley also acknowledged that changes he said are needed to the state pension system will be unpopular, particularly among state employees, who will be asked to contribute more or see their benefits lowered.

The formal Republican response to O'Malley's speech was delivered by House Minority Whip Jeannie Haddaway-Riccio (R-Talbot), who criticized the governor for not cutting the budget more aggressively.

"While the governor has made a start, it simply is not enough," she said. "With spending still outpacing revenues, it will now be up to the Maryland General Assembly to do the heavy lifting."

wagnerj@washpost.com marimowa@washpost.com davisa@washpost.com

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